US: AGOA, DR-CAFTA fixes and Burma bill finally passed

Legislation that will help provide stability for apparel and textile firms sourcing from sub-Saharan Africa and Central America, and also renews trade sanctions on Burma, was finally passed yesterday (2 August) by the US Senate and the House of Representatives.

Their passage follows a row over funding for the African Growth and Opportunity Act (AGOA), which temporarily halted the bills' progress last week.

It also puts an end to uncertainties over the third-country fabric provision under the African Growth and Opportunity Act (AGOA), which had been set to expire in September 2012.

It is estimated that almost 95% of apparel imported from AGOA nations is made with third-country fabric, and the provision's extension to September 2015 now means apparel produced in sub-Saharan African countries made from third-country fabric, or fabric originally produced anywhere in the world, will continue to enjoy duty-free access to the US.

The Republic of South Sudan has also been added to the list of countries eligible for AGOA duty-free benefits on products including apparel, footwear and textiles

As far the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA), is concerned, the fixes apply to rules of origin for textile products from Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua.

In particular, the modifications provide certainty of duty-free treatment for women's and girls' woven pyjama bottoms and clarify how certain items will be treated on the textiles "short supply" list of the FTA. Another change would be to fix a long-standing loophole under the trade pact by requiring all sewing thread, monofilament and plied, to originate in the US/DR-CAFTA region in order for products to qualify for preferential tariff treatment.

The bill also renews for another three years an import ban that has been in place since 2003 to prevent goods from Burma entering the US market. But it also leaves the Administration with the authority to waive or terminate the import sanctions.

The legislation must now be signed by President Barack Obama before being implemented.

Burmese Vice President Visits Arakan State

Protesters hold banners outside the office of the United Nations High Commissioner for Refugees in Rangoon on Aug 3, 2012.

Burmese Vice-President Sai Mauk Kham traveled to the predominantly Muslim township of Maungdaw in northern Arakan State on Friday amid growing international criticism of the government’s handling of recent communal conflicts between Arakanese Buddhists and Muslim Rohingyas.

The purpose of the trip is to assess the situation in the area two months after the worst violence in decades broke out there in early June, according to Win Myaing, a spokesperson for the Arakan State government.

During the two-day trip, the vice-president and government ministers will observe conditions at camps set up for the tens of thousands of people from both communities who were displaced by the riots. In addition to Maungdaw, they are expected to visited Kyaukphyu and the state capital Sittwe.

The visit comes as international rights groups and foreign governments, especially in Muslim countries, have accused the government of siding with Buddhists in the clashes. Earlier this week, US-based Human Rights Watch released a report alleging that government troops targeted Rohingyas during the crackdown on the violence.

In a statement released on July 27, UN High Commissioner for Human Rights Navi Pillay also claimed that Muslim communities in Arakan State were being targeted by security forces.

However, the state government denied these charges, insisting that there was no discrimination against the Rohingya, a Muslim minority of about 800,000 people living mostly in townships near the Bangladeshi border.

“If they [foreign critics] come here, they will see that we have treated everyone equally,” said Win Myaing, adding that the state government plans to propose “security measures” to address the accusations during the vice-president’s visit.

While groups such as Amnesty International have said that hundreds of Rohingyas have been killed, raped, beaten and arbitrarily arrested since Burma declared a state of emergency in Arakan State in June, official figures put the number of casualties on both sides at 77 dead and 109 injured.

In addition, 4,822 houses, 17 mosques, 15 monasteries and three schools were destroyed, according to figures released by the government. In a report on Monday, the state-run New Light of Myanmarsaid that some 14,328 Arakanese Buddhists and 30,740 Rohingya Muslims have been affected and are currently living in 89 temporary camps.

Meanwhile, some Arakanese have complained that the international community has been one-sided in its expressions of concern. They noted, for instance, that during his visit to Maungdaw and Buthidaung townships on Tuesday, UN human rights envoy Tomas Ojea Quintana spoke only to Rohingyas who had been displaced by the conflict.

“It isn’t fair to focus only on the suffering of one side,” said Ven Manisara, a Buddhist abbot who heads a local aid group in Maungdaw. “Our people have also suffered a lot.”

This perceived imbalance—and deep-seated resentment of the Rohingya, who are seen by many in Arakan State as interlopers from neighboring Bangladesh—has been a boon to the government of President Thein Sein, who last month rejected international calls to accept the Rohingya as citizens.

At a protest in front of the office of the United Nations High Commissioner for Refugees in Rangoon on Friday, demonstrators held banners supporting Thein Sein’s refusal to recognize the Rohingya as one of the country’s ethnic groups.

Meanwhile, Sai Mauk Kham’s visit to Arakan State comes as Bangladesh, which has refused to allow a fresh influx of Rohingyas into the country in the wake of the recent violence, has ordered international charities to stop providing aid to those who make it across the border.

Three aid groups—France’s Medecins sans Frontieres and Action Contre la Faim and Britain’s Muslim Aid UK—have been told to suspend their services in Cox’s Bazar District bordering Burma.

Burma on the move

Seven years ago, the government of Burma (Myanmar) started to move the main offices of the civil and military bureaucracy from Yangon north to Nay Pyi Taw. Travelers can take a morning return flight from Yangon. During the rainy season, when flight schedules become unpredictable, the safer recourse is the road.

A 201-mile, four-lane divided tollway connects the two cities. At Mile 115, a rest camp offers travelers a choice among several shops serving food and selling staple provisions—and access to the only bathroom facilities between the two points. Business on a Sunday mid-afternoon was brisk, with buses unloading passengers bound for Nay Pyi Taw or the nearby town of Pyinmana.

Traffic is still relatively light. On a weekday morning drive back to Yangon, we overtook about a dozen 4-wheeled vehicles during the entire stretch of the 4-hour tollway trip. The traffic is bound to increase. The government remains highly centralized. Nay Pyi Taw (“site of the royal country”) is the indispensable stop for diplomats and any organization whose business requires government authorization.

On my first trip to Nay Pyi Taw in 2007, the relocation, officially announced in July 2006, had only started. The government had built staff housing, appropriately differentiated to reflect rank, but many officials had not yet moved their families from Yangon. Five years later, all of the ministries had constructed their own monumental buildings and the infrastructure of shops and schools supported a new community.

Nay Pyi Taw now has its own mall, with a supermarket, restaurants and movie theaters. A number of hotels have opened for business and a couple are still under construction. Residences rival those in Manila’s gated communities. The government had also built a slightly smaller version of the Shwedagon Temple in Yangon, affirming the capital’s connection to the country’s precolonial history and traditions.

More impressive than infrastructure as a sign of the changes taking place in Burma is the emergence of young leaders at the highest level of government. Those whom I met struck me as competent, committed, and confident. They recognized that their country still faced many serious problems. They also knew that they had a narrow window of opportunity to undertake fundamental changes and appeared determined to seize the moment, and they were willing to learn from the experience of others.

Last week, Burma convened a meeting on the mining industry. Some 300 participants reportedly showed up, among them foreigners and Filipinos engaged in the extractive-industries sector in the Philippines. While known to be rich in mineral resources, the Philippines is not the only deal on offer, and Burma clearly intends to join the game.

Our Burmese colleagues were aware of the discussions in the Philippines on a regulatory framework that would promote the sustainable development of the mining industry. We talked about the research that the Asian Institute of Management’s Policy Center is conducting on the sharing of benefits from mining operations between the state and private investors.

For President Aquino’s recent State of the Nation Address, the research staff had supplied the note that the government received only 9 percent of the P145 billion generated by mining activities. The bulk of government collections comes from income taxes, more easily collected from the corporate, large-scale mining sector. The government would receive more if it could more effectively collect taxes from the small-scale mining sector.

The Policy Center’s research is also looking at firm-level costs and benefits. Corporate financial results—and company contributions to government—can differ because of many factors: the kind and quality of their mineral deposits; the scale and efficiency of their operations; the stage of their life cycle. A company could be paying as much as 20 percent of its revenues to the state.

As it is opening up its own mining industry to private investors, the issue of benefit-sharing is also crucial for Burma. Those I talked to seemed to appreciate the need for the equitable sharing of mining benefits between the state and private capital, between the national government and local government units, and between the current and the future generations of citizens.

They acknowledged that the benefits from mining did not come only from the direct company payments to the state. The funds companies pay their suppliers and employees and their corporate social responsibility expenditures also boost the economy of mining communities. But they were also concerned about the environmental costs that come with mining operations. As mines have a finite, productive life span, they realized that the state must try to maximize their share of the benefits they bring.

Throughout its history, Burma has suffered its share of natural and political calamities, and survived. It now values and wants foreign investments, but not at any cost. Potential investors now lining up to enter Burma should be prepared for some tough negotiations.

Edilberto C. de Jesus is president of the Asian Institute of Management.